Xtek Ltd - 2019 Review - Multiple Key Milestones Achieved
Xtek Ltd (ASX:XTE)

2019 Review - Multiple Key Milestones Achieved


What's Happened

XTEK Limited (ASX: XTE, ‘XTEK’) has sent a letter to investors from Managing Director Philippe Odouard which details the achievements and milestones the company has met in 2019.

What are the key highlights?

Key highlights of 2019 featured in the letter Include:

  1. The strategic acquisition of HighCom Armour Solutions, Inc (“HighCom”), which provides XTEK with direct access to the lucrative US market.
  2. The development of XTEK’s XTclave™ factory in Adelaide, Australia, which is currently in the final stages of completion.
  3. Record FY19 financial performance which was underpinned by the continued growth of the Small Unmanned Aerial Systems (SUAS) business.
  4. The enhancement of XTEK's capabilities to be a full-service SUAS supplier, with the ability to supply and provide ongoing support throughout the SUAS lifecycle.
  5. First international XTatlas™ orders.
  6. Building formal relationships within the Space sector including with organisations such as Skykraft and the Australian Space Agency.
  7. The exclusive reseller agreement of Heckler & Koch products in Australia.

What to expect moving ahead

The company expects the first XTclave™ manufactured products to be launched in the US in early 2020, following the integration of HighCom’s operations, expertise and experience into XTEK. This is also expected to coincide with the opening of XTEK’s XTclave™ factory in Adelaide, Australia.

As US defence and military contract require US-based manufacturing and production, XTEK’s long-term plan is to develop its existing manufacturing capabilities in the US in order to target these valuable U.S. contracts.

What does this announcement mean?

Erik Bergseng CFA® from Mawson Graham provides perspective on this recent announcement.
Erik Bergseng CFA®
Written by Erik Bergseng CFA®
Published Dec 17, 2019

As the letter outlines, XTEK have experienced a tremendous amount of growth over the course of 2019. Looking ahead, the near-term commercialisation of XTclave™ would be a transformative event for the company. This is because each XTclave™ machine could potentially produce US$20m in revenue at full capacity. Because this is a wholly owned proprietary technology, the revenues that are derived from XTclave™ would be expected to carry a relatively high profit margin. XTEK have also stated that they plan on setting up manufacturing capacity within the United States, which would be in addition to its manufacturing capacity intended in Adelaide.

Furthermore, XTEK have also stated in this letter that they are currently in active discussions with numerous customers in Australia with the focus on achieving domestic orders.

The information within this section has been provided by Mawson Graham Pty Ltd and is for general information purposes only and is not intended to reflect any recommendations or financial advice. The information in this section has been prepared without taking into account your objectives, financial situation or needs. For this reason, you should consider the appropriateness of the advice or recommendation in light of your own personal circumstances, relevant risk factors, the nature and extent of your risk of loss, as well as the legal and accounting consequences before acting making an investment or trading decision regarding any Financial Product mentioned herein. While it is believed that all information sourced and contained within this section to be accurate at the time of publication, liability for any errors, omissions, accuracy or completeness of the information (except any statutory liability which cannot be excluded) is specifically excluded by Mawson Graham Pty Ltd, its associates, officers, directors, employees and agents. Past performance is not a reliable indicator of future performance. Important Disclosure: Mawson Graham Pty Ltd, its directors, associates and employees advise that they may hold securities, may have an interest in and/or earn brokerage, investor relations fees, corporate fees, and other benefits or advantages, either directly or indirectly from client transactions arising from any information mentioned within this section and in documents published within this section.
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Managing Director's Summary

Philippe Odouard

"XTEK seeks to capitalise on significant value opportunities, underpinned by favourable trends and sentiments in the global defence sector, driven by the highest level of defence expenditure in over 25 years (~2% of global GDP). With the US representing more than half the global defence budget, XTEK is well positioned to access this lucrative market with a focus on leveraging the HighCom network to achieve sales with US law enforcement agencies. "

Philippe Odouard
Managing Director, Xtek Ltd

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